February 18, 2016

Monthly Hi-Lo breakout strategy

This is an extremely simple trading strategy using no indicators and which can still generate good returns.

RULE: buy on close above last month's high with previous month's low as SL.

Risk management: Limit risk per trade to 1% of your trading capital.

Returns: is whatever the market gives. You cannot quantify this in advance.

Here is a sample chart for SIEMENS.

  • First long trade is in NOV when stock closes above OCT high 880. SL is OCT low (768).
  • In DEC, SL increases to NOV low (856) and gets hit.
  • In JAN buy on close above DEC high (985) with SL at DEC low 795
  • In FEB, SL is at JAN low 875
  • In MAR, SL is at FEB low 1040
  • In APR, SL is at MAR low 1320
  • SL gets hit in APR and you are out of trade.
  • in MAY, consider a buy on close above 1500 only
  • And in JUN, consider a buy on close above 1420 only (assuming new high is not made this month).
So simple and easy to understand. 

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